A new hotel ownership platform allows accredited investors to purchase equity in luxury and lifestyle hotel properties and receive exclusive benefits, including trading shares for hotel rooms instead of cash.
RSRV, launched in collaboration between tZERO and Science Ventures, offers a way for hotel owners to combat higher lending rates.
Stephane De Baets, RSRV
“One thing that has changed most from an owner’s point of view in the last two years is cost of capital,” said Stephane De Baets, founder/acting CEO, RSRV, who is also the founder/president of Elevated Returns, the owner of The St. Regis Aspen Resort in Aspen, CO, the first hotel on the platform. “When the Federal Reserve had the zero-interest rate policy, you could put plenty of leverage into a hotel and because the cost of money was so cheap, it was easy to service your coverage.”
With interest rates rising over the last two years, what was acceptable leverage has become very “onerous” today, according to De Baets.
“You have a cash-flow squeeze, and owners are finding it harder to service their debt,” he added. “That is also what is causing inflation because they need to raise the room price to pay their lenders. At the end of the day, no matter what you do, the consumer pays for it.”
In looking at the situation, he decided to connect the consumer and the hotel owner together. “Why don’t we take the intermediary, which is the bank, out of the equation?” he asked, adding, “As an owner, I would rather give you a cheaper room rate—a discount—that is going to make you happy, rather than take your money and give it to a third-party lender that does nothing for me except provide me with capital.”
Additionally, by offering attractive member perks, the program is likely to lead to increased occupancy; customer engagement and retention; and customer satisfaction, according to De Baets.
Essentially, the consumer is purchasing shares in the hotel at a certain rate based on the cost of a stay at the hotel at that time. For example, if the cost of a stay at the hotel is 2,500 shares now, it will be 2,500 when the shareholder cashes them in, whether it is this year or five or 10 years from now.
The St. Regis Aspen Resort
As long as the investor holds shares in a hotel, they receive exclusive benefits not available to the general public, which may include VIP experiences, exclusive access to hotel events and “substantial” discounts on various hotel rooms and services, according to De Baets.
Investors can also trade shares in a secondary market hosted by tZERO.
“As a shareholder, I can speculate,” he said. “I can actually bet on the future value of a room. We know inflation is showing its ugly teeth in all aspects of the economy. Here, I have an instrument that is going to follow the future value of a room and, worst-case scenario, I can use my token and stay on property.”
For a regular guest of a property, it makes sense, according to De Baets.
“If you are a repeat guest, you redeem the token for something you would have bought anyway,” he said. “If you look at it that way, you have unlimited upside and zero downside because your downside is using your token and staying on property, which you do every year, no matter what.”
While The St. Regis Aspen Resort is the first property on the platform, RSRV expects interest from more properties as word gets out.
“We are going to acquire a position in third-party properties and provide cheaper capital to those properties,” he said. “Owners love us because they get cash. They used to pay Apollo or Blackstone 15% on their debt. Now, they are paying RSRV 5% on their debt. It’s a great deal.”
De Baets said he is excited for the potential of the platform because it can change the way hotels are valued.
“Typically, investors in hotels—people like me—need to choose a property, hope that the top line is growing, and then hope that the management is efficient enough to create a bottom line for me,” he said. “The way people have been valuing hotels is a cap rate based on the bottom line of a property. If a hotel does $20 million and you say that luxury properties trade at a 3% cap rate, the value of the property is $600. This platform will allow people to invest in the hospitality property based on the top line. All that they care about is the future price of a room.”
He added, “If we are successful with our partners to get the message across, we’ve turned real estate investing upside down.”
